Early economist Irving Fisher argued that the predominant factor leading to the Great Depression was over indebtedness and deflation; Almost 80 years later this looks very familiar, doesn‘t it?
Nov.22, 2008 in
Market Outlook
Fisher tied loose credit to over-indebtedness, which fueled speculation and asset bubbles. The chain of events,according to Fisher proceeded as follows:
1 Debt liquidation and distress selling
2 Contraction of the money supply as bank loans are paid off
3 A fall in the level of asset prices
4 A still greater fall in the net worth of businesses, [...]
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